Link to this page: https://www.socialistparty.org.uk/issue/1124/32154
Would a wealth tax end poverty and inequality?
Sarah Sachs-Eldridge, Socialist Party executive committee
We face crises on every front. The ongoing health crisis has tragically already cost over 2.5 million lives worldwide.
Economic crisis has also come in Covid's wake. In Britain it threatens 1980s levels of youth unemployment. Over the next few years it's estimated that one in 20 of us will be destitute.
The environmental crisis threatens lives and livelihoods on a major global scale. Inequality is rampant and detrimental. The charity Oxfam has warned that the world's poorest "could need over a decade to recover from the economic impact" of Covid-19, while the world's ten biggest fortunes alone grew by $500 billion.
The Office for Budget Responsibility, which tracks government spending, said on 3 March that borrowing would be £355 billion in the financial year to April 2021 - the highest figure ever seen outside wartime.
Who will pay for the pandemic spending? Will it be the working class that pays again through austerity, or the billionaires? Which class will determine what measures are taken and what society's priorities are?
A Wealth Tax Commission (WTC) was "established in Spring 2020 to provide in-depth analysis of proposals for a UK wealth tax, for the first time in almost half a century" as part of this debate.
For the working class and poor of the world it's clear that change to the way society is organised is needed. Increasingly discussion and debate will take place about how to most effectively fight to defend our lives and our livelihoods - and whether a wealth tax should be supported and fought for.
Billionaires increase wealth
While the very richest seem to inhabit another planet in many ways - billionaires across the world saw their wealth rise by 32% to $14.7 trillion last year - they cannot escape completely the crises that confront their system.
A former Tory advisor writing in the Financial Times said: "If the past few years have taught us anything, it is that economic insecurity can breed political instability. In recent decades, globalisation and deindustrialisation combined with rising inequality have contributed to the appeal of populist politicians across many advanced economies. The resulting instability - and the negative impact on social mobility - should worry all conservatives".
The unavoidable question confronting the working class is how can we solve the huge problems that confront us - of securing the basics of food, shelter, a job and a future for our children?
Nearly 27 million American adults report that their household sometimes doesn't have enough to eat. In Britain four million children live in poverty. The fact that six million people in Britain will breathe a sigh of relief that the Tories are maintaining the £20 a week 'uplift' to Universal Credit gives a glimpse of the depths and breadth of poverty here.
In order to protect the future of capitalism in extreme situations like today, the capitalist class has shown itself prepared to take all kinds of steps that appeared unthinkable before. Over the last year, in order to save their system, capitalist governments have been forced to take actions they previously thought they would never consider. However, the measures they implement are ultimately in the interests of saving the capitalist system.
"No, I do not believe that now is the time, or ever would be the time, for a wealth tax." So said Rishi Sunak, Tory Chancellor in July 2020. Eight months on he announced the first rise in corporation tax since 1974 and speculation is rife that he could go further.
Argentina voted for a one-off 'millionaires' tax' on 4 December. It's expected to raise £2.2 billion, intended for Covid relief and to address inequality. Argentina ranked second-last of 53 countries as the best places to be during the pandemic, and the poverty rate rose to 40.9% in the first half of 2020. Nonetheless, the tax has been attacked as 'confiscatory' by the representatives of big business and big farmers.
The billionaires will fight tooth and nail against any incursion into their wealth. One legal company that advises some of Britain's richest, including hedge fund managers, claims to have doubled the planning work it does to help their clients prepare for a potential wealth tax. The billionaires will also fight it through their representatives in politics - the Tories and Keir Starmer are defenders of the capitalist system.
However, part of the churning generated by the crisis of capitalism means that there are elements even within the capitalist class who can see that a continuation of the rising inequality and impoverishment of the 99% puts the future of their system in jeopardy from the revolt being brewed.
While polls in Britain and the US find support for a wealth tax at around the three-quarter mark - including a majority of Tory and Republican voters - it's not only those at the sharper end of inequality who are debating these ideas. A majority of readers of the Financial Times, the mouthpiece of the capitalist class, are in favour.
In an open letter to the 2020 presidential candidates printed in the New York Times, 18 billionaires made the case for a moderate tax on wealth. These mavericks are actually among the more far-sighted members of their class - they can see that the impoverishment of the 99% cuts across their ability to sell their products and make profits.
One signatory is Nick Hanauer, a venture capitalist. He has "come to the conclusion that a wealth tax would actually increase investment, boost productivity, grow the economy, and create more and better jobs".
There are also voices who seek to represent the 99% who are calling for wealth taxes. New York Congress Woman Alexandria Ocasio-Cortez, the 'left' Democrat, has put forward a top rate of 70% on income over $10 million. Her fellow Democratic Senator Elizabeth Warren has called for a wealth tax of 2% on wealth over $50 million - which is estimated to affect 750,000 families in the US.
Here in Britain, Richard Burgon, secretary of the Socialist Campaign Group of Labour MPs, has proposed a windfall tax on big business. Predictably, Boris Johnson has rejected this. But so has Labour leader Keir Starmer, saying 'now is not the time'. He's keen to make it crystal clear he has the bosses' backs. Fighting inequality cannot be done without having to confront these defenders of capitalism. The moral case will not be enough.
The headline finding by the WTC academics is that, after accounting for non-compliance and administration costs, a one-off wealth tax payable on all individual wealth above £500,000 and charged at 1% a year for five years would raise £260 billion. They base their figures on net wealth (all assets minus all debt). With a threshold of £2 million it would raise £80 billion.
This is not the first time a wealth tax has been discussed in Britain. But they have always been confronted with resistance from the bosses. In 1974, for example, the then Labour chancellor Denis Healey retreated from his 'pip-squeezing' wealth tax plans when faced with a big-business investment strike, hyperinflation and rising unemployment. Rather than challenge the bosses, Labour chose to take the axe to vital public services.
But it cannot be ruled out that, under pressure, even the Tories could be forced to implement a limited wealth tax. In order to save the system they represent - capitalism - they have already shown themselves prepared to take all kinds of seemingly unthinkable steps. Historically, much higher taxes have existed - under Thatcher corporation tax stood at 52% - now it's 19%.
But as the response to the proposed increase to 25% in the latest budget shows, the fat cats are not about to give up their gains easily. The vast majority of the super-rich will fight any measures that reduce the share of wealth they get, no matter how moderate.
The Socialist Party is in favour of taxing the rich - 'until the pips squeak'! In the 2015 general election, standing as part of the Trade Unionist and Socialist Coalition, we called for a one-off tax on wealthy individuals or businesses to raise cash for the NHS.
We explained that a one-off levy of 20% on the £519 billion then held by the richest 1,000 individuals would raise over £100 billion, enough to plug the then funding gap many times over. The Sunday Times 2020 Rich List calculated the combined wealth of Britain's super-rich to be £743 billion. That 20% levy would now produce £148 billion.
Following the 2007-08 world economic crisis, the Socialist Party offered a programme to resist the working class paying for a crisis that we didn't cause. It included a 50% levy on the uninvested capital of the major corporations.
By the end of June 2020, UK private non-financial corporations (ie mainly the corporate sector) had accumulated - including global deposits - gross cash worth almost £900 billion. It certainly is gross. As a share of GDP, corporate cash has risen from about 20% in 1987 to about 40% today. That's not to mention the estimated $800 billion lost in tax every year on the vast wealth of corporations and individuals stashed in tax havens.
Because the bosses don't see an easy way to make a profit, the capitalist class are failing to fulfil their historic role of investment in the productive forces.
Our programme is therefore not limited to a wealth tax. The problem with poverty and inequality isn't only that the 1% hoard so much of society's wealth. It's that the private ownership of the means of production by the capitalist class condemns society to crisis. It is a short-sighted system.
Capitalism is based on private property and the exploitation of working people's labour power. It's motivated by their profits not social need. At every opportunity, the bosses will attack the living conditions of working people to increase their own profits. That's what austerity, 'fire and rehire' and privatisation all represent.
This means that a socialist programme that aims to meet the needs of the billions and not the billionaires has to go beyond demanding a wealth tax. The only way to stop the endless sabotage of the capitalist class would be nationalisation of the tiny number of massive corporations that dominate the economy.
That programme starts with recognising the role of the working class under capitalism. The potential power of the working class lies in our role in production and in the potential for collective action that brings, given we are brought together in the workplace by capitalism.
A socialist programme explains that solving the problems faced by both people and the environment requires more than just fighting to prise a portion of their wealth off the billionaires; it means removing the grip of big business from society altogether, and the working class taking power into its own hands to start to democratically plan society in the interests of all.
A key plank to that programme is therefore nationalisation of the top 125 companies that dominate the economy. That would provide the basis to begin democratically planning production, and the use of resources properly, without interference from the 1% or 0.1%.
A democratic plan of production run by elected representatives of the workers and the wider community, would make it possible to harness the technology and technique already created by capitalism, not to increase exploitation of the working class, but to build a society that met the needs of all. Further measures would be needed to address the attacks and sabotage by the capitalists, including linking the working class in struggle on a world scale.
But such a programme is not defended by any of the major parties standing in the May elections in Britain. It is not defended by the Democrats in the US. Building mass working-class organisations - trade unions and mass workers' parties armed with a socialist programme that says we must not pay for the capitalist crisis - is key. In May, the Socialist Party will be standing in the elections under the banner of the Trade Unionist and Socialist Coalition as part of the fight for such a party.
If you agree that these are the tasks that confront us, join the Socialist Party.
In The Socialist 10 March 2021:
What we think